Less than a week after a Tennessee Valley Authority fuel cost adjustment took effect, increasing monthly electric rates for Princeton Electric Plant Board customers, TVA officials said a larger increase is on the way this fall.

TVA increased its wholesale fuel costs by 2.1 percent effective July 1, meaning distributors like the PEPB will pay 2.1 percent more for their electricity, supplied by TVA.

For Plant Board customers with a monthly usage of 1,000 kilowatt-hours, the fuel cost adjustment will mean an increase of about $4 on monthly power bills.

The fuel cost adjustment came four months after TVA passed a 7 percent base rate increase onto its customers, on April 1.

On Wednesday, TVA announced another fuel cost adjustment would take effect in October.

“A more significant increase beginning Oct. 1, 2008, is certain, as the incremental impact of rising fuel and purchased power costs are reflected in future FCA adjustments,” TVA officials said in a statement forwarded from Plant Board headquarters Thursday.

The 2 percent July increase did not reflect “dramatic increases seen in the market prices for commodities over the past few months,” the statement reads.

About 56 percent of TVA’s power supply comes from fossil fuels like coal, oil and natural gas, according to the statement.

As fuel prices increase, TVA’s cost to generate electricity increases.

“Specifically, coal prices have more than doubled since the beginning of the year and continue to rise,” the announcement states.

“In addition, the TVA region continues to suffer from extreme drought conditions, causing the replacement of its cheapest form of generation — hydro — with one of the most expensive: power purchased from other suppliers.”

The Plant Board’s power supply contract with TVA ends in January 2010.

After that expiration, the utility will purchase bridging power off the market while awaiting the completion of the Prairie State Generating Campus in Lively Grove, Ill.

Once complete, the Prairie State plant will supply the Plant Board and the Paducah Power System, in partnership as the Kentucky Municipal Power Agency (KMPA), with electricity.

The first Prairie State unit is expected to come online in Aug. 2011, with the second following in May 2012.

Eight months into the project, construction is on schedule and on budget, said Plant Board Manager John Humphries.

Community leaders invited to a June briefing on the project were informed that power generated from the new plant was expected to carry a cost of about 4 cents per kilowatt-hour.

After TVA’s fuel cost adjustment took effect this week, the Plant Board’s current cost is about 6.94 cents per kilowatt-hour.

The bridging power required in the interim between the expiration of the TVA contract and the startup of the Prairie State plant has already been contracted, Humphries noted.

“The cost of that power for that period is lower than what we’re paying TVA today,” he said.

The Prairie State plant will be fed by an adjacent coal mine.

Regional public power utilities, like KMPA, will own 95 percent of the plant and the mine, which is expected to supply coal for at least the next 30 years.

The Plant Board has a 20-megawatt share in the plant.

Current plans call for power to be transmitted to Princeton via an 8-mile connection to the Kentucky Utilities/LG&E transmission grid.

TVA’s transmission line will be maintained as an emergency backup supply source, and a planned local peaking power plant will supply extra power as needed, said Humphries.